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Posted by tangent1.57 on January 22, 2008, 9:19 pm
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Wouldn't it be a good idea for Acquiring Corp. to purchase calls of
Distressed Corp. prior to a takeover - hostile or otherwise? This
would help Acquiring Corp. to purchase Distressed Corp. at a
"discount".
Also, to leverage this transaction, Acquiring Corp. could sell puts of
Distressed, since the price will invariably go up. Acquiring Corp.
uses thse funds to buy the calls. Moreover, even if prices fell below
the strike price of this put options, Acquiring Corp. would simply
purchase the stocks of a company that they want to acquire anyways.
This is what they wanted anyways.
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